WASHINGTON, May 25 (Reuters) - A U.S. commodities regulatorsaid he is "acutely dismayed" that his agency is not movingquickly to curb speculation in the oil markets, especially assummer driving season begins.

Bart Chilton, a Democratic commissioner at the CommodityFutures Trading Commission, said in a letter to Congress thatthe agency's "position limits" rule is a critically importanttool to address speculation that may drive up fuel prices.

In October, the CFTC finalized the rule despite fierceopposition from industry groups who have challenged it in court.It is set to go into effect later this year.

The rule aims to curb speculation in commodities markets bylimiting the number of contracts any trader can hold in gold,oil and other commodities.

"Particularly as we go into the summer driving season - atime when we usually see spikes in, for example, crude oil andgasoline prices -- I think it is extremely important that theCFTC has all the necessary arrows in our quiver to ensure thatconsumers pay fair prices," Chilton wrote in a letter toDemocratic Senator Deborah Stabenow, chairman of the AgricultureCommittee.

Chilton's letter is a response to Stabenow's May 18 plea toregulators to hurry up and implement reforms included in the2010 Dodd-Frank financial oversight law.

One such reform was the position limits rule, which industrygroups have challenged in court, saying they would irreparablyharm the marketplace.

The Securities Industry and Financial Markets Association(SIFMA) and the International Swaps and Derivatives Association(ISDA) filed their legal challenge in December.

SIFMA and ISDA argue that the regulations would force theirmembers to drastically alter their businesses, cost them tens ofmillions of dollars, and send customers fleeing.

VOLCKER RULE

Chilton also said JPMorgan Chase & Co's $2billion-and-growing trading loss is a timely reminder forregulators to implement a tough Volcker rule against proprietarytrading.

He said the losses at the biggest U.S. bank weakens theargument of reform critics. "It undercuts the anti-regulatorynaysayers who have been trying to de-fund and de-fang financialmarket reform rules," Chilton wrote.

The Volcker rule was included in the Dodd-Frank law andseeks to ban banks that receive government backstops likedeposit insurance from trading for their own gain.

The rule, which was proposed by regulators in October andhas yet to be finalized, is part of a broader bid to reduce riskand boost oversight of the financial system, which was severelyshaken during the 2007-2009 financial crisis.

It includes key exemptions to allow banks to hedge risk andmake markets for customers seeking to trade securities.

Questions have swirled over whether the current draft of therule would have banned JPMorgan's trades which were part of afaulty hedging strategy had generated a loss that could reach $5billion.

The CFTC is hosting a roundtable on Thursday to discuss theexemptions.